There's a funny thing about entrepreneurs: They're often way too optimistic about sales and way too pessimistic about prices.
I've witnessed this phenomenon many times over the years, most recently in two women with whom I've been working. A few months ago, Carey Balogh and Julia Dawson opened a play space for kids near my home in Brooklyn, New York. It's called Frolic, and it offers classes, birthday parties, a boutique, a coffee lounge, and a play area, all with a rock 'n' roll theme. It's a great concept, and it will be very successful, I'm sure. But first, Carey and Julia need to learn that business decisions must be guided by numbers, not emotions.
When Carey and Julia come to see me, they're always bubbling with excitement. They can't wait to tell me how well things are going—how many members have signed up, what new offerings they're considering, the great publicity they're getting. Then we go through the numbers and discover that they're not yet breaking even. They're losing money every week. "You have to make some changes," I told them recently. "If you don't, you'll run through your capital and be left with two choices."
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